Tesla Q1 Earnings: Margins Narrow, Revenue Misses—but All Eyes Turn to Musk's Robotaxi, FSD, and Energy Vision

Tesla kicked off Magnificent Seven earnings season with a Q1 report that fell short on headline numbers but was not without silver linings. While revenue and earnings missed consensus expectations, investors are watching the real show: CEO Elon Musk's conference call commentary, which is expected to steer sentiment around Tesla's evolving vision for robotaxis, full self-driving (FSD), energy storage, Elon's DOGE involvement, tariff color and its AI ambitions.

Tesla reported Q1 revenue of $19.3 billion, down 9% year-over-year and below the $21.3 billion consensus estimate. Adjusted EPS came in at $0.27, well short of the $0.43 consensus. Operating income dropped 66% year-over-year to $399 million, resulting in a slim 2.1% operating margin. Automotive gross margin excluding regulatory credits was reported at 12.5% — better than whisper numbers around 9-10%, but still well below historic norms. Shares traded down about 2% in after-hours action, reflecting results that were better than feared but far from robust.

Demand was clearly soft in Q1, as Tesla delivered 336,681 vehicles compared to 422,875 in the prior quarter. Vehicle production also fell due to a planned switchover for the new Model Y across all four vehicle factories. While that transition was successful, it cost Tesla several weeks of production. The company said that the production changes are intended to pave the way for a new generation of vehicles, including a more affordable model slated to begin production in the first half of 2025.

By segment, total automotive revenue declined to $13.97 billion, while gross margins in the unit continued to erode amid a high-discount selling environment and lower average selling prices. Despite tariff concerns, Tesla maintained that its auto segment is less exposed than energy storage. Management noted that Megafactory Shanghai will become a key asset in the energy business going forward due to its highly localized supply chain.

The energy generation and storage segment was a bright spot, with a record 10.4 GWh deployed during the quarter. Gross margin in the segment improved sequentially, and Tesla expects continued long-term growth despite potential volatility from tariffs. Notably, Tesla said increasing AI infrastructure and traditional utility demand are creating an outsized opportunity" for energy storage to support grid stability and base load needs.

Tesla reaffirmed its full-year product plans, with production of new vehicles on track for 1H25. It also said it remains on schedule for a pilot robotaxi launch in Austin by June and early Optimus robot deployment across its factories by 2025. AI continues to be a core strategic focus, with the company highlighting FSD progress and its recent launch in China, achieved without country-specific training data.

Tesla ended the quarter with $37 billion in cash and equivalents, a $0.4 billion increase from the prior period. Free cash flow came in at $664 million, down from estimates of $1.08 billion. Capital expenditures were $1.49 billion, down 46% year-over-year, as Tesla signaled that it is prudently managing spending in a volatile macro and trade environment.

Management acknowledged the challenges ahead, stating, "Uncertainty in the automotive and energy markets continues to increase as rapidly evolving trade policy adversely impacts the global supply chain and cost structure of Tesla and our peers". The company will revisit its full-year 2025 guidance in the Q2 update but reiterated that it has sufficient liquidity to fund its product roadmap and strategic initiatives.

Despite the muted financial results, bulls may find support in Tesla's reaffirmed production roadmap, strong cash position, and the promise of transformative technologies. Shares may test support near the $225 level in the coming sessions. But as is often the case with Tesla, the post-earnings narrative will likely be shaped less by the Q1 numbers and more by Musk's remarks on what's to come. Investors will be listening closely for updates on autonomy, new vehicle models, AI monetization, and the company’s broader strategy in the face of rising geopolitical and trade headwinds.